On 3 December 2021, the Court of Appeal handed down judgment in Smith and Burrell v Royal Bank of Scotland plc [2021] EWCA Civ 1832 allowing the Bank’s appeal on the limitation ground, but not on ‘out of scope’. The Respondents’ PPI “top-up” claims were dismissed on the basis that they were time-barred under the Limitation Act 1980.

The respondents claimed that their relationships with the Bank were unfair under section 140A of the Consumer Credit Act (“CCA”) as a result of undisclosed commission received by the Bank in relation to PPI policies. These cases are two of many thousand such claims currently progressing through the County Courts. The issue for the Court of Appeal was how the unfair relationship provisions apply in cases in which the PPI policy was cancelled before the unfair relationship provisions came into force.

The cases were determined against the Bank at first instance and on first appeal. Before the Court of Appeal, the Bank advanced two arguments: (1) on a proper application of the transitional provisions in relation to ss.140A-140C CCA, the Respondents had no cause of action (the ‘out of scope’ argument); (2) in any event, the claims were time-barred by section 9 of the Limitation Act 1980.

Lord Justice Birss, giving a judgment with which Lady Justice Macur and Lord Justice Coulson agreed, held:

  1. When assessing the fairness of the relationship, the Court is entitled to take into account all relevant matters whenever they took place. This includes matters concerning a related agreement, even if that related agreement has come to an end before the point in time at which unfairness is being assessed (paragraph 45);
  2. The transitional provisions (paragraph 16 of Schedule 3 to the Consumer Credit Act 2006) do not preclude the assessment of unfairness taking account of matters concerning a related agreement, even if that related agreement came to an end before the transitional period ended (paragraph 46); paragraph 16 of Schedule 3 has the effect of removing reference to “related agreements” from section 140B CCA but not from 140A CCA;
  3. The transitional provisions preclude the Court ordering repayment of sums paid by virtue of a related agreement which concluded prior to the end of the transitional period. Therefore, if sums had been paid solely by virtue of that agreement, no remedy could be ordered. However, here there was a finding of fact (which was not challenged in the appeal) that the PPI premia had also been paid by virtue of the credit agreements themselves. It followed that the Court did have the power to order repayment of the premia under section 140B CCA (paragraphs 47 and 48);
  4. The relevant date for the assessment of unfairness does not always and necessarily have to be the date when the relationship ended (assuming that the relationship has ended by the time the Court considers the matter). It is open to the Court to find that the fairness of the relationship has changed over time (paragraph 58);
  5. In Patel v Patel and Scotland v British Credit Trust Ltd conduct years beforehand had effects continuing over a long time which resulted in findings at trial that the relationship “was” unfair at the point in time that it was to be assessed. However, those cases do not establish that the Court is bound to find that the entire relationship was fair or the entire relationship was unfair. Relationships that were fair can become unfair and vice versa;
  6. In the present cases, the PPI policies had come to an end and the final premia had been paid many years before. The relationships were clearly unfair prior to the final premia being paid but the relationships were not unfair thereafter. The unfairness in undisclosed commission cases identified by the Supreme Court in Plevin v Paragon Personal Finance was the customer being kept in ignorance of what was a material fact, at the point in time that they were deciding whether to enter into the PPI agreement (paragraph 67). Once all sums had been paid and no liability remained, the fact that the bank continued to leave the customer in ignorance of the commission well after the customer’s liability to make any payments has ceased, does not justify a finding of subsequent unfairness, all the more so when the credit agreement alone, absent the PPI agreement, was not itself unfair. The relationship was unfair when the PPI agreement was entered into in ignorance of the commission and was unfair up to the date the final premium was paid. However, the relationship changed after the PPI agreement ended. There was no case, alleged or proved, that any economic effect or consequence of the PPI agreement persisted after the PPI premia had been repaid (paragraph 68);
  7. The unfair relationships came to an end when the final premia were paid. The relationships thereafter were not unfair so the starting point for the purposes of limitation is the date when the final premia were paid (paragraph 69).

The claims had been brought more than six years after limitation had started to run and it followed that the Bank’s appeals were allowed on the limitation ground and the Respondents’ claims were dismissed as they were time-barred.

Whilst it was not argued before the Court, Lord Justice Birss stated that it was the Court’s provisional view that where unfairness ended before the unfair relationship provisions came into force, the unfair relationship provisions had no application at all.

The full judgment can be read here.

Summary by Lee Finch.